Credible commitment problems are characterized by a temporal dimension (someone makes a promise today that she does not have an interest in keeping tomorrow) and by the fact that the person making the promise is not the one to benefit from the promise being kept. What are some mechanisms for dealing with credible commitment problems?

Question

Social Studies

Karen Norris

9 January, 03:56

Credible commitment problems are characterized by a temporal dimension (someone makes a promise today that she does not have an interest in keeping tomorrow) and by the fact that the person making the promise is not the one to benefit from the promise being kept. What are some mechanisms for dealing with credible commitment problems?

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Answers (1)

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Callum Small · Answer 1

Answer: these mechanisms might be a) enforceable contracts, b) repeated interactions c) institutions that alter the distribution of power.

Explanation:

Enforceable contracts means contracts that are achievable by the parties because they have tied to certain padlocks.

Repeated interactions means they are predictable.

Too much power corrupt institutions. If there is redistribution of power there will be better outputs for all the members of society.